eBay shifts gears in India as rivals step up

MUMBAI (Reuters) - eBay Inc (EBAY.O) is stepping up investment in India to boost its share of a market dominated by domestic players such as Flipkart and fend off encroachment from arch-rival Amazon.com (AMZN.O).

Muralikrishnan B., eBay India's Country Manager, poses for a photo at the company's head office in Mumbai April 26, 2012. REUTERS/Vivek Prakash

The e-commerce company dipped a toe into the Indian market seven years ago and stuck with a cautious approach, even as local upstarts made splashy grabs for business in a tiny but growing market.

“The talks of us having missed the bus are exaggerated,” Muralikrishnan B, country manager for Silicon Valley-based eBay told Reuters in an interview in Mumbai.

“Most of the new business models are just waiting to implode. We have chosen the cautious route, unlike a lot of Indian businesses who are blindly investing money without having an eye on sustainability or profitability,” he said.

The company hopes to bring its online payments business PayPal into India soon, which would help draw more online shoppers in a country where most online retail merchandise is sold on a cash-on-delivery basis.

eBay India, which started in 2005, clocks six transactions per minute, according to the Internet and Mobile Association of India. By comparison, fast-growing Flipkart, founded by two former Amazon employees in 2007, sells 20 items per minute.

Muralikrishnan, 36, joined eBay shortly after its entry into India.

He does not believe eBay has ceded an early mover advantage.

“We waited for the right moment because we didn’t want to get caught up in the clutter. We were sure a lot of this new money will dry up and that has already started to happen.”

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Muralikrishnan B., eBay India's Country Manager, poses for a photo at the company's head office in Mumbai April 26, 2012. EBay Inc is stepping up investment in India to boost its share of a market dominated by domestic players such as Flipkart and fend off encroachment from arch-rival Amazon.com. Picture taken April 26. REUTERS/Vivek Prakash/Files

India’s $10 billion e-commerce market, dominated by online travel portals led by MakeMyTrip.com (MMYT.O) and Yatra.com, is seeing a flurry of promotional activity from startups that sell everything from electronics to clothes, shoes and fragrances.

Online shopping is still in its infancy, but it has struck a chord with time-constrained middle class shoppers in India, where rising incomes, aspirations to own brands, and an underdeveloped brick-and-mortar retail network are pushing many to shop from their homes.

eBay, which started in India selling flowers and chocolates as gift items to love-struck couples, now sells a variety of products including phones, mountain climbing gear and collectible stamps, either via auction or at fixed prices.

Muralikrishnan, who helped Sify Technologies (SIFY.O) set up shop in India before joining eBay, acknowledges there are worthy competitors. Its much-larger global rival, Amazon, recently entered India through the acquisition of a local price comparison platform called Junglee.com and is expected to launch an international online store.

“At some point of time Amazon will enter India and they are a credible threat to us,” he said.

eBay plans to invest millions of dollars in advertising in coming years, although Muralikrishnan did not give specifics.

It is also investing in strengthening its supply chain and distribution by tying up with courier services, and it hopes that PayPal will clear regulatory hurdles at the Reserve Bank of India soon.

“PayPal should enter India soon and then we will have a lot more people making payments online because that’s a globally trusted name,” Muralikrishnan said.